Financial exposure and the international transmission of financial shocks

Gunes Kamber and Christoph Thoenissen

No DP2013/06, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: This paper analyzes the transmission mechanism of banking sector shocks in an international real business cycle model with heterogeneous bank sizes. We examine to what extent the financial exposure of the banking sector affects the transmission of foreign banking sector shocks. In our model, the more exposed domestic banks are to the foreign economy via lending to foreign firms, the greater are the spillovers from foreign financial shocks to the home economy. The model highlights the role of openness to trade and the dynamics of the terms of trade in the international transmission mechanism of banking sector shocks Spillovers from foreign banking sector shocks are greater the more open the home economy is to trade and the less the terms of trade respond to foreign shocks.

JEL-codes: E32 J6 (search for similar items in EconPapers)
Pages: 43 p.
Date: 2013-01
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-opm
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Citations: View citations in EconPapers (26)

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Related works:
Journal Article: Financial Exposure and the International Transmission of Financial Shocks (2013)
Journal Article: Financial Exposure and the International Transmission of Financial Shocks (2013)
Working Paper: Financial exposure and the international transmission of financial shocks (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2013/06

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